What does the energy transition mean for the future of work?
What does the energy transition mean for the future of work?
Meeting the climate target of the Paris Agreement will require a radical shift in the energy sector. The energy transition will involve significant changes to energy technologies and to the economic structure of the global economy.
This will have profound implications for growth and inflation. But it will also involve important changes to the current structure of the workforce and the shape of global labour markets.
This note investigates the social dimensions of the energy transition, focusing on the impact on employment across countries and industries. It also discusses the key challenges for the reallocation of labour within countries while moving towards net zero, as the energy transition is likely to encounter misalignments in several dimensions.
Positive impact on global employment
Employment in the renewable energy sector is already on an upward trajectory. Data from International Renewable Energy Agency (IRENA) showed that renewable energy employment worldwide reached 12 million in 2020, up more than 60% since 2012.
Several studies that have investigated the net impact on employment of environmental policy measures suggest it is positive, as the decrease of fossil fuel jobs in the net-zero scenario is more than compensated by new jobs created in renewables, power grids and flexibility, and hydrogen.
In particular, the analysis by the International Energy Agency (IEA) shows that the most cost-efficient pathway to reach net zero by 2050 could lead to a 14 million increase in energy sector jobs. This gain is forecast to occur by 2030, thanks to new investment in the clean energy sector, and be offset by a possible decline of five million positions in the fossil fuel industry. The result is a potential net gain of nine million jobs globally over the next decade. While this seems large increase, it is a fairly small part of the overall workforce.
Winners and losers
While global employment is set to rise as a result of the move to net zero, the transition is also likely to create winners and losers, as the development of energy jobs will vary greatly between regions.
In particular, countries that are currently heavily reliant on fossil fuel production are likely to see dramatic jobs losses. A recent study from Stanford University shows that there will be substantial divergence across countries in terms of employment change when transitioning all energy to 100% clean, renewable wind-water-solar (WWS) energy, efficiency, and storage.
On the one hand, a transition to WWS reduces fossil fuel, biofuel, bioenergy, and nuclear jobs. Such jobs include jobs in the mining, transporting, and processing of fuels as well as in the generation of electric power. Transitioning also reduces jobs in the building of internal combustion engines, gas water and air heaters, gas stoves, gas turbines, coal plants, pipelines, gas stations, and refineries.
On the other hand, however, a transition also creates jobs in building and installing solar photovoltaic panels, concentrating solar power plants (which harnesses the sun’s energy to produce electricity), wind turbines, geothermal plants, tidal and wave devices. It also generates jobs in the electricity and hydrogen storage industries.
As the demand for fossil fuels falls in the WWS transition, exporting countries such as Canada, Russia and parts of Africa would lose employment in their extraction sectors, which is not compensated by an increase in renewables energy jobs. On the other hand, countries that are currently importing fossil fuel energy, like European countries, will experience an increase in their employment on the back of higher domestic production of renewable energy.
However, it is important to underline that while the majority of regions are likely to experience a net job gain, the social transition could present severe challenges even to the countries that register a positive impact on employment.
What can be done to address challenges of energy transition
The reallocation of labour within countries is one of the key frictions that the transition will encounter, as the move to a low-carbon economy may not generate jobs in the locations where jobs are lost in the fossil-fuel economy.
Fossil fuels are used everywhere, but the locations of extraction, refinement, and generation are geographically localised. Research done by the IMF shows that coal miners, for example, happen to be concentrated in a few key regions as coal can only be dug in the places where coal deposits are found (chart 4). This means that large-scale job displacements from coal mine closures can affect entire communities, with the potential for leaving local economies with few economic opportunities.
This makes it politically difficult to reduce the role of coal, given its geographical concentration. Policy-makers will be challenged to provide incentives to workers to move to neighbouring regions able to offer better economic opportunities or to stimulate economic restructuring in coal-intensive regions, establishing other industries and creating new jobs for fossil fuel workers.
Economic restructuring will be crucial to the survival of these regions. There are examples in the past of coal mines converted into green energy production sites, that have allowed the creation of new jobs and have enabled reemployment particularly during the construction phase.
Repurposing existing sites for renewables
Mine sites with good sun exposure can become locations for solar power generation, like the Goettelborn coal mine in Saarland Germany and the Wheal Jane tin mine in Cornwall that were converted into a solar energy park in 2004 and 2011, respectively. More recently, West Virginia announced that it is planning to build its largest solar farm that will sit on the site of the Hobet Mine, one of the state’s largest former coal mines, which went bankrupt in 2015. Other mines, as they are placed in high-latitude areas with high wind resource, have instead been converted into wind farms, like the Dave Johnston Mine in Wyoming.
A recent study from the European Union’s Joint Research Centre analysed the technical potential to install solar photovoltaic electricity generation system in the 42 Coal Regions in Transition (CRiT) in the EU, finding that the available area is sufficient to generate the same amount of electricity created by all the coal and lignite-fired power stations currently operating throughout the European Union. The Brookings Institution has analysed a US geographic database of renewable energy generation potential to find that many current fossil fuel hubs are ideal sites for renewable energy production. In total, a quarter of the counties in the US with the greatest potential for both wind and solar electricity generation are also fossil fuel hubs.
Local employment opportunities are set to be created particularly during the construction phase of the green energy sites. However, even if governments manage to attract new industries in fossil-fuel intensive regions, some frictions will still persist. In particular, the IEA highlights that temporal and educational mismatches may arise.
Targeted government spending on training
With regards to temporal, or challenges related to timing, the creation of clean energy jobs may not occur at the same time, or at the same pace, as fossil fuel job losses happen. The emergence of new economic sectors can take many years, if not decades. Former fossil fuel workers may be out of the workforce for a long period of time before new jobs are created. This means that they could suffer long-term unemployment with less chance of being re-hired when new opportunities arise. Fiscal support will be fundamental as it will need to provide income support during periods of unemployment. However, welfare policies that compensate the laid-off workers are not going to be sufficient as they cannot address the profound effects of local structural change.
An educational misalignment is likely to emerge as the workforce may lack the required skills in order to adapt as economies undergo change. To prevent the formation of pockets of severe unemployment, governments need to ensure targeted technical training and skills development to help empower fossil fuel workers, ensuring a smooth transition to other employment.
What does history tell us about successful interventions?
Germany provides an important lesson for a successful energy transition, showing how reskilling helps affected workers relocate from declining towards emerging industries. The Ruhr was once one of the largest coal mining areas of the country. Since the second half of the 20th century, this region experienced a significant decline of its coal industry.
Employment in hard coal mining in the area was radically downsized, from more than 450,000 in 1950 to less than 3,000 in 2018, when the last two coal mines were shut down. Large public investment in higher-education institutions and technology centres, together with the expansion of road networks and public transport, enabled the region to achieve a fundamental transformation from coal production and steel to a knowledge-based economy. The share of employees in the service sector in the region is now above 70%. The economy now has a diverse profile, including eco-tourism, several leading universities, renewable energy manufacturing and high-tech hubs.
Some areas of the UK have also experienced a shift away from coal over the past decades, but they provide an example of a less successful transition. In particular, recent research on the state of coalfields finds that that these local labour markets are still lagging behind national averages and other parts of the country on several indicators.
The first evidence can be found in the job density, the ratio between the number of employee jobs and the local working age population. Across the former coalfields there were just 55 jobs for every 100 adults in 2017, much below the national average of 73 jobs per 100 adults.
Another key finding is that despite the disappearance of the coal industry, these regions tend to keep an occupational structure that is still skewed towards manual occupations. In these areas, 53% of employed residents work in manual occupations, well above the national average of 44%.
The weakness of the labour market in the former coalfields is also being reflected in earnings. On average the hourly earnings for men living in the coalfields are 8% below the national average.
Probably this is due to the fact the UK government has concentrated its efforts on compensation policies rather than training policies or incentives to attract new industries in the area. Unemployment subsidies and income support measures are not sufficient to diversify the economies of former mining communities and to limit the long-lasting effects of energy transitions.
The absence of new opportunities has also had a negative spillover on women living in these communities. The research has also found evidence of a sustained squeeze in the number of job opportunities for women. This has occurred as men began to compete for and take the same jobs in other sectors as a result of declining mining activity in former coalfield areas. More specifically, they find that mine closures have gender-specific effects on manufacturing employment. The number of male workers in the secondary sector increases, but the number of females workers decreases.
The energy transition will also encounter a sectoral misalignment as low-carbon technologies are much more metal intensive than fossil fuel energy production, implying changes in value chains. For example, solar panels need large quantities of copper, silicon, silver and zinc, while wind turbines require iron ore, aluminium and rare earths. The transition will therefore have important implications for the industrial sector of the economy and on global trade, strengthening the relationships with countries that export these key metals and minerals.
Transition has to overcome political short-termism and vested interests
The misalignments highlighted in this paper are likely to increase the political resistance to the transition, as the specialisation of local communities in fossil fuel production could make them particularly exposed to the risk of stranded physical and human assets. Political leaders will need to convince these communities that the move to a low-carbon economy, while mitigating climate change, will also bring sustainable jobs. However, the positive impacts of the transition are not going to be tangible in the short term, creating a potential conflict with the agendas of politicians, who usually tend to focus on policies with immediate benefits that voters can see.
Finally, there is going to be some resistance from the fossil fuel industry that has powered economic growth for the past centuries and that is likely to hinder any major policy change. Environmental concerns, such as global warming and more frequent extreme weather events, are not enough to destabilise what so far has been a very powerful and profitable industry, but economic pressures and reform efforts probably are.
Many jobs will be lost through humanity weaning itself off fossil fuels. However many more will be created in the shift to renewable energy, and the related infrastructure required to make it happen. But, while this energy transition will create more jobs worldwide than it destroys, there will be major disparities between countries, and between regions within countries. Even within the winners, the new jobs won’t all be in the same locations as the old ones, will require different skills, and will take time to materialise. This is likely to lead to significant social disruption.
The only way to resolve this is with heavy government involvement, focussed on the areas and individuals that stand to suffer. The UK’s experience following the closure of coal mines in the north of England show that focussing on measures like income support, will not be enough. Targeted technical training and skills development will be needed. And the Ruhr in Germany’s experience shows that purposeful, large scale, public investment in infrastructure and services in areas that stand to suffer can allow them to reposition and thrive.
The challenge of all of this is that the pay-off from any government interventions will be felt over a period that is much longer than the average election cycle. Failing to address them, however, risks imperilling public support for the energy transition, driving greater divisions within society and on the political scale. Long term thinking is easier said than done.
 Net Zero by 2050 A Roadmap for the Global Energy Sector, IEA, May 2021.
 Impacts of Green New Deal Energy Plans on Grid Stability, Costs, Jobs, Health, and Climate in 143 Countries Jacobson et al., 2019,
 Fiscal Monitor, IMF, 2019.
 Solar Photovoltaic Electricity Generation: A Lifeline for the European Coal Regions in Transition, European Commission, Joint Research Centre, 2019.
 How renewable energy jobs can uplift fossil fuel communities and remake climate politics, Tomer et al., 2021.
 The long and winding road from black to green, Galgóczi, 2014.
 The State of the Coalfields, Beatty et al., 2019.
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